Following the financial crisis, new ways to measure risk — including stress testing — changed the way the financial services industry monitors risk. Today, however, compliance experts warn that over reliance on modeling is a risk as well. In other words, who is measuring and monitoring the models?

"Stress testing is well established," said S. Ramakrishnan, group vice president and general manager, Oracle Financial Services Analytical Applications in an interview with Wall Street & Technology. "Now, every financial institution has also built risk models and they rely on them to determine exposures. But who is managing the models?"

Managing and monitoring the models has created a new risk discipline, which could be called model risk management, added Ramakrishnan. "C-level executives will want to know how the models are built, and now they are monitored," he says. "Everyone is relying on models now, so they have to be accurate."

To meet evolving regulatory mandates, financial institutions require a view of risk across all financial and business models. Many firms are struggling to achieve this transparency because they continue to manage their models in siloed environments, according to Oracle. Oracle Financial Services Model Risk Management product provides an environment to manage all risks associated with the use of models, including risks arising due to poor data quality, incorrect or inappropriate use, design flaws, incorrect implementation and unauthorized access.

The solution delivers a single repository for all model information across the enterprise, includes pre-built dashboards and provides drill-down capabilities for added insight, according to Oracle. The product also helps firms to improve governance around the use of models through a structured and consistent framework for periodic assessment and validation of models across categories.

"Today's financial institutions need a comprehensive understanding of their risk-return to make strategic decisions that strengthen competitive advantage, reduce the overall cost of compliance and enhance long-term customer value," said Ramakrishnan in a statement. "The Oracle Financial Services Enterprise Risk Management suite is built to meet these requirements. The platform delivers a consolidated view of risk across the enterprise, enabling firms to make faster and more informed strategic capital decisions."

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